Denver Public Schools Superintendent Tom Boasberg cut his vacation short Friday to address a financial-deal controversy rekindled after being featured on that day’s front page of The New York Times.

Boasberg flew back from San Francisco to rebut claims made by the newspaper as part of its “Payback Time” series examining consequences of growing public and private debts.

The newspaper used Denver Public Schools as an example of how municipalities and school districts are reeling financially after entering into “exotic transactions” peddled by Wall Street before the credit crisis and reported that the district’s 2008 restructuring of its pension system has plunged DPS into deeper debt.

Boasberg said DPS is not reeling and is, in fact, thriving because of the deal, which he says has saved the district $20 million to date in pension costs. “We are saving $1.5 million a month going forward,” he said.

The issue is being used in political ads against former DPS Superintendent Michael Bennet, who is in a primary battle against former Colorado lawmaker Andrew Romanoff for the Democratic nomination for U.S. Senate. Under Bennet, now a U.S. senator, DPS began seeking a way to get out from under its pension struggles. At the time, DPS was paying twice as much as other districts in pension-related expenses.

DPS was the only Colorado district with its own pension system and had been trying to join the rest of the state in the Colorado Public Employees’ Retirement Association. The change allowed DPS teachers to move to another district and take their pension with them. It also made DPS a more attractive destination for teachers already enrolled in PERA. DPS, however, needed to become fully funded to join PERA.

In April 2008, the district issued $750 million in short-

term notes to fully fund the DPS pension plan.

The transaction allowed the district to backfill a $400 million pension shortfall and refinance about $300 million of debt at a lower interest rate than its original 8.5 percent.

At the time, bankers advised the district that “due to turmoil in the credit market and bond insurance market, a traditional fixed-rate transaction is more costly” than issuing the variable-rate pension certificates with a hedge in the form of a fixed-pay interest-rate swap.

The deal means DPS’s interest rate stays at about 6 percent over 30 years. The bank takes the risk if rates go above that mark, but the bank benefits when the rates are lower.

The school board, which included current members Bruce Hoyt, Theresa Peña, Arturo Jimenez and Jeannie Kaplan, voted unanimously to approve the deal. Today, Kaplan says the board was not fully informed of the deal’s risks.

Last fiscal year, with the financial market meltdown, DPS did not realize any of its $20 million in savings. The market froze, and DPS had to pay about a 9 percent interest rate on notes that didn’t sell.

Still, Boasberg said, the district ultimately saved about $17 million over what it would have paid during the 2009-10 year had it not done the deal.

This year he expects about the same savings.

He also touts a recent independent audit of the state pension fund that projected DPS’s portion will be 140 percent funded in 30 years. The rest of the school pension under PERA is expected to be nearing 100 percent at that time.

Board member Bruce Hoyt, an investment banker who is supporting Bennet for Senate, maintains the deal was a good one at the time and still is.

“We are saving money,” Hoyt said. “It is helping us implement reform and keeping more teachers in the classroom. And have much higher funding in the pension account than other divisions, It allowed us to merge with PERA. It is allowing us to save money every day.

“We were putting in over twice as much in our pension than any other school district — $1,300 per student, as opposed to $600 for other districts,” he said. “That was $50 million a year we weren’t able to put in the classroom.”

Last year, DPS spent $950 per student on pension-related expenses, compared with the rest of the state spending between $700 and $800.

Boasberg said Friday that he asked The Times to correct about “two dozen factual errors” in the story, which says DPS spent $115 million in interest and other fees — $25 million more than originally anticipated.

Boasberg said the $115 million is less than the $136 million DPS would have spent had it not made the deal. Boasberg also denies the district is in the process of unwinding the deal, as suggested by the article.

Boasberg said the district is evaluating its options in the context of the potential passage of Amendment 60, Amendment 61 and Amendment 101 — which would limit the district’s ability to restructure the deal.

“If there is a benefit to the district and the option to put even more money in the classrooms, we would certainly look at that,” he said. “It’s entirely our choice. If there is a cost to the district, then we would not do it.”

In a statement, The Times said “if the principals provide evidence that warrants a correction, we will do so, as we always do.”

Jeremy P. Meyer was a reporter and editorial writer with The Denver Post until 2016. He worked at a variety of weeklies in Washington state before going to the Walla Walla Union-Bulletin as sports writer and then copy editor. He moved to the Yakima Herald-Republic as a feature writer, then to The Gazette in Colorado Springs as news reporter before landing at The Post. He covered Aurora, the environment, K-12 education, Denver city hall and eventually moved to the editorial page as a writer and columnist.

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